U.S. President Barack Obama is committing at least US$320-million to revive bankrupt Detroit, primarily through grants and other programs, to raze blighted buildings, hire police and firefighters and improve transit.

Detroit’s emergency manager proposed freezing pension benefits for some current city workers starting in 2014 and will launch a two-month probe into the city’s dysfunctional and error-prone handling of employee benefits.

A copy of Kevyn Orr’s proposal was released by one of Detroit’s two pension boards on Thursday, the same day the city’s auditors posted a report that shed light on how Detroit overpaid benefits, including unemployment compensation for almost two years to 58 people who never worked for the city.

A delegation from Washington led by Attorney General Eric Holder, Housing and Urban Development Secretary Shaun Donovan and Transportation Secretary Anthony Foxx will meet with Michigan and city officials Friday.

“We’re going to continue to support the efforts under way in Detroit and ensure the federal government is an active partner in supporting the revitalization of the city,” Gene Sperling, director of the National Economic Council and head of an interagency working group on Detroit, said in a statement.

Detroit, once an auto-manufacturing powerhouse, declared the largest U.S. municipal bankruptcy in history on July 18 after years of decline in which its population fell by more than half, to 700,000 from 1.8 million. The city has more than US$18-billion in long-term obligations and is plagued by unreliable buses, broken street lights and long waits for police and ambulances. Emergency Manager Kevyn Orr took over city finances in March.

Debt Rallies

Some Detroit debt rallied Friday. Unlimited-tax general obligations maturing in April 2028 traded at about 92 cents on the dollar, the highest since July 18, when the city filed for bankruptcy. The yield spread on the securities, backed by Assured Guaranty Corp., is 2.52 percentage points more than top-rated bonds, the smallest gap since Aug. 9.

The White House will commit US$150-million for demolition of blighted properties and neighbourhood redevelopment, in federal and other funds. Block grants of US$65-million and US$25.4-million from public and private sources will be used to tear down and refurbish buildings.

Detroit has almost 70,000 empty and abandoned homes and 80,000 empty lots, amounting to 20 square miles of vacant land, about the size of Manhattan, according to a Detroit Future City report.

The demolition money is welcome, though with a typical cost of US$10,000 to tear down each forsaken structure, much more is needed, said John George, founder of Motor City Blight Busters Detroit. His group is working to secure and remove empty structures primarily on the city’s northwest side.

“We’ll take what we can get,” George said in an interview. “Blight is like a cancer: If you don’t nip it in the bud, it spreads and kills everything. You’ve got to start chemotherapy, if you will, especially in the neighbourhoods.”

Related

Top lawmakers and administration officials have said there is no pathway for a federal bailout of the city. The actions announced today underscore the fine line the administration and state officials must walk, utilizing existing programs and unused or underutilized funds, while not asking Congress for federal dollars.

The efforts will be announced after top administration officials meet with state and city officials, with more meetings planned in the future.

Administration officials will also announce US$3-million from the Justice Department for additional police officers, establishing a bike patrol and supporting youth anti-violence programs, the White House said in a statement. The Federal Emergency Management Agency will expedite access to US$25-million to hire 150 firefighters and to buy equipment.

First Step

Police take an average of 58 minutes to respond to priority calls, compared with a national average of 11 minutes, Orr said in a June report. The department’s roster has shrunk by 40% since 2003, he said.

“The only way to rebuild the city is to provide a safe environment for residents and businesses,” said Mark Diaz, president of the Detroit Police Officers Association. “We need a lot of work. It’s going to take more than one gesture, but we’re excited about the recognition by the White House.”

The Obama administration will deploy almost US$140-million in transit funding, by ensuring access to more than US$100-million in Transportation Department grants, including US$24-million for bus repairs and security cameras, according to the announcement. Another US$25-million in grants will be made available to help a streetcar project.

How much of the money is new remains to be seen, said Megan Owens, executive director of Transit Riders United, a Detroit- based nonprofit organization. For example, she said, the streetcar grant had already been approved.

Still, “these are funds that are greatly appreciated,” Owens said, especially if it keeps more buses rolling. Typically, one of every six is off the road for repairs, Owens said.

“It results in extremely overcrowded buses, people left at bus stops,” she said. “In recent months it feels like it’s getting worse.”

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